Journal · 6 February 2026
Related-party disclosures that trip first-time audit clients
Family-owned companies often understate director loans and intercompany rent. We outline the evidence we ask for before drafting notes.
First-time audit clients in family businesses frequently treat director loans as informal cash movements. For financial statement purposes those balances need terms, interest policy, and year-end amounts in the notes.
Intercompany rent for shared warehouses or offices should match lease agreements and bank transfers. If one entity pays and another occupies, we ask for board minutes approving the arrangement.
We also ask for a related-party matrix listing directors, close family members, and controlled entities. Incomplete matrices are the usual reason disclosure drafts bounce between finance and the audit partner.
Gathering this evidence before fieldwork starts is kinder than reconstructing it under deadline pressure. Bring the matrix, the loan ledgers, and any written approvals to the planning meeting.